Moody's said the downgrades--which range from one to three notches--primarily reflect the concurrent downgrades of most of these banks' standalone credit assessments. For five banks, the downgrades also reflect Moody's view that the Spanish government's ability to provide support to these banks has been reduced.

The ratings firm said the drivers for the downgrades stem from adverse operating conditions, due to Spain's renewed recession, ongoing real-estate crisis and high levels of unemployment; reduced creditworthiness of the Spanish sovereign; rapid asset-quality deterioration; and restricted market funding access.

Earlier this week, the ratings agency downgraded its ratings on 26 Italian lenders, part of a series of similar moves on sovereign and corporate debt issuers across the euro zone's periphery. Moody's downgraded Spain's sovereign rating in February.

Banco Santander, Banco Bilbao Vizcaya Argentaria (BBVA, BBVA.MC), Banco Espanol de Credito (BNSTY, BTO.MC), Unicaja Banco SA and Banco Popular Espanol (POP.MC) were all downgraded to A3. Santander UK was downgraded by one notch to A2. Banco Cooperativo Espanol was downgraded by three notches to Baa1 while Caja Rural De Navarra and Banco Sabadell were both downgraded by one notch to Baa1.

Bankinter (BKT.MC) was downgraded three notches to Baa2. Caja Rural De Granada was downgraded two notches to Baa3, Liberbank SA was downgraded to Ba1, Cajamar Caja Rural was downgraded to Ba2 and Lico Leasing was downgraded to Ba3

CaixaBank (CAIXY, CABK.MC) received a three-notch downgrade to A3, Caja de Ahorros y Pensiones de Barcelona was downgraded to Baa2 and CECA was downgraded by three notches to Baa2.

Rival ratings agency Standard & Poor's downgraded Spain's sovereign credit rating by two notches in April, citing "a challenging fiscal outlook" amid worries on the ability of the country's regions to curb spending. Later that month, it followed up by taking negative rating actions on 16 Spanish banks, including a raft of downgrades.

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